There are several methods to work short rows into your knitting projects. In this video, Mary Beth Temple explains how to work Japanese Short Rows.
Mary Beth is working on a swatch of Stockinette stitch (knit on Right Side/purl on Wrong Side). She notes that a knitting pattern will tell you where to place the short rows. On the Right Side, she knits to the point where the short row will be placed, and she turns her work to the Wrong Side. On the Wrong Side, she slips the first stitch purlwise, and uses a locking stitch marker to mark the working yarn. She is careful to hold the stitch marker up against the fabric as she begins purling on the Wrong Side.
When she reaches the point of working the next short row, Mary Beth turns the work to the Right Side. She slips the first stitch purlwise and uses a locking stitch marker to mark the working yarn. She is once again careful to hold the stitch marker up again the fabric as she begins knitting on the Right Side of the swatch.
Mary Beth continues knitting on the Right Side of the swatch until she comes to the gap that was created by turning the work. She grabs the stitch marker at the back of the work near this gap, and tugs on it. She is careful not to twist the stitch, and places it onto the left needle and removes the stitch marker. She knits this stitch together with the next stitch on the left needle to close the gap. She continues working knit stitches until she is ready to do the next short row and turns the work again.
On the Wrong Side, she once again slips the first stitch purlwise, and uses a locking stitch marker to mark the working yarn. She is careful to hold the stitch marker up against the fabric as she begins purling on the Wrong Side to the gap created by the previous short row. When she reaches the gap, she slips the next stitch purlwise, pulls the marked yarn up and onto the right needle, removing the stitch marker. The two stitches are slipped back to the left needle and they are purled together into a single stitch.
This process is repeated for the number of short rows desired. Mary Beth shows her completed short rows, noting that the short rows are nearly invisible due to the way the stitches are worked together.